The Northern Sea Route led to the West – Newspaper Kommersant No. 221 (7422) dated 11/29/2022

NOVATEK is preparing to complete this year’s navigation to Asia via the Northern Sea Route, reducing LNG supplies via this route by 30% compared to 2021. According to Kommersant’s data, in just one season, the company delivered 30 batches of LNG to Asia, or about 2.1 million tons. The company sought to deliver most of the cargo to Europe, where gas prices were higher than in Asia for almost the entire year.

NOVATEK shipped the last consignment of liquefied natural gas this year to Asia with delivery via the Northern Sea Route. It was delivered by the Arc 7 tanker Fedor Litke to China on November 23, and now the tanker is returning to Sabetta, according to Kpler data. From Sabetta, new LNG shipments to the east no longer go, respectively, the navigation along the Northern Sea Route in the east this year can be considered completed.

According to Kommersant’s calculations based on Kpler data, in 2022 NOVATEK shipped 30 LNG shipments to Asia, or 2.1 million tons.

NOVATEK did not respond to Kommersant’s request.

A year earlier, NOVATEK delivered 44 batches of LNG, or about 3 million tons of LNG, to the Asia-Pacific countries. In 2020, 34 shipments, or 2.4 million tons of LNG, were shipped from Yamal LNG to Asia via the Northern Sea Route. In 2019, when the plant has not yet reached full capacity, there were 17 batches, or 1.2 million tons.

For almost the entire year, Europe bought up LNG cargoes from all over the world to compensate for the decline in pipeline supplies from the Russian Federation. The military actions of the Russian Federation in Ukraine led to a sharp increase in LNG prices in Europe: the European premium formed on the continent attracted more cargo to the continent, taking cargo from the leading Asian importers – Japan, South Korea, India and Pakistan. As European Commission spokesman Tim McPhee reported on October 14, in the first nine months of 2022, Russian LNG exports to Europe increased one and a half times, to 15 billion cubic meters. Asia this year did not enter into serious competition for LNG cargoes with Europe due to high levels of reserves, reduced demand, including due to lockdowns in China.

Even now, when the markets have calmed down a bit, the difference in gas prices in Europe and Asia is about $300 per 1,000 cubic meters, and this is without taking into account the difference in logistics costs, which are lower in the case of European exports, says independent expert Alexander Sobko. “In these circumstances, the question rather arises as to why LNG went to Asia at all,” he says.

Although NOVATEK’s long-term contracts mainly involve supplies to Asia, Asian buyers themselves have often resold gas to Europe this year.

Mikhail Zhuravlev of the Institute of Energy and Finance notes that on average, in January-October, spot prices for LNG in Europe were 12.4% higher than in northeast Asia.

This season, NOVATEK opened navigation along the Northern Sea Route on June 17, and it traditionally closes in December. Judging by the AARI data, the ice situation in the eastern sector of the Northern Sea Route is now quite difficult, says Mikhail Grigoriev, head of the Gekon consulting center: intensive ice formation began ten days earlier than expected.

In previous seasons, NOVATEK tried to expand the navigation window along the Northern Sea Route. The earliest wiring in the east of the NSR began on May 18, 2020, the latest on January 5 and 6, 2021. But at that time, while passing the route, the tanker “Nikolai Evgenov” damaged one of the three azipods (propulsion systems), after which the ship had to be repaired. After this incident, wiring experiments were no longer carried out.

In June, the head of NOVATEK, Leonid Mikhelson, stated that the company confirmed the possibility of sailing east along the Northern Sea Route nine to ten months a year, and with the construction of new LK-60 nuclear icebreakers from 2024, it expects to transport LNG in this direction all year round. “We’re going east. They send us there, we go,” Mr. Mikhelson added. According to Evgeny Abrosov, Deputy Chairman of the Management Board of NOVATEK, the annual volume of LNG transportation along the Northern Sea Route by 2026 will be about 20 million tons.

Tatyana Dyatel